Gold stocks shine as South African equities lose luster: chart

January 22, 2016, 4:40am

By Neo Khanyile, Bloomberg Business

South African gold companies are bucking the selloff in the country’s stock market as the spread of the bullion price in rand rises to the highest level over the benchmark equities gauge in more than two years.

The spread of gold priced in rand is at the biggest gap to South African shares since August 2013. (Chart: Bloomberg)

The five-member FTSE/JSE Africa Gold Mining Index is up 28 percent this year as the 8 percent slump in the rand boosts profit margins for mining companies that earn in dollars and pay costs in the local currency, pushing the rand-gold price to a record. Harmony Gold Mining Co., Sibanye Gold Ltd., Pan African Resources Plc and AngloGold Ashanti Ltd. are leading gains on the FTSE/JSE Africa All Share Index, which is down 8.7 percent this year amid an emerging-market rout.

“The gold price has held up pretty well, but the rand has blown off terribly,” Peter Major, a mining analyst at Cadiz Specialized Asset Management in Cape Town, said by phone. “Gold companies, which were marginal and barely making money when the rand was 13 to one, will benefit when the rand suddenly goes to 16 or 17. All of a sudden they’re making 20 percent more revenue and it all goes to the bottom-line.”